Facebook is overestimating its ad reach

Facebook overstates the number of people that are able to see advertisements on its site, according to an analyst, meaning it is likely misleading business partners who seek the platform for marketing purposes.

For example, advertisers are told that they could hit up to 41 million 18- to 24-year-olds in the U.S., but according to recent census data only 31 million 18- to 24-year-olds live in the US.

In reproducing the study for the U.S., Wieser said Facebook's Ads Manager claims it can potentially reach 41 million 18- to 24-year-olds, 60 million 25- to 34-year-olds, and 61 million 35- to 49-year-olds.

People on Facebook self-report their ages, so these may also vary from census data. Marketers long have been wary of digital measurement because on the internet people can make fake profiles and create bots to click on them, creating a false sense of heightened buzz.

"We think that awareness of general measurement issues causes larger advertisers to require the use of third-party measurement services, including Nielsen's DAR and comScore's vCE, to provide the basis against which Facebook is paid", Wieser said. The analyst is one of the only minds on Wall Street with a Sell rating on FB shares. They take into account multiple factors such as location, demographics, user behavior, device data, and so on.

Defending the figures, Facebook said: "they [reach estimates] are created to estimate how many people in a given area are eligible to see an ad a business might run. They are not created to match population or census estimates", said a Facebook spokesperson in an emailed statement.

For example, Facebook may count non-residents or visitors to a region, as well. The tech company states that it only charges advertisers based on the amount of people the ads truly reached.

The discrepancy would be nowhere near the first timeFacebook has been caught misrepresenting its metrics to advertisers. The company said a metric for average user time spent on videos was artificially inflated.

"However, because of measurement issues the company has faced in the past (and possibly a new one identified by a trade publication in Australia and replicated by us within the United States), we think the primary victor of Facebook's expansion in video will be third party measurement firms", he added.

"While Facebook's measurement issues won't necessarily deter advertisers from spending money with Facebook, they will help traditional TV sellers justify existing budget shares and could restrain Facebook's growth in video ad sales on the margins", he wrote in a note to clients.